E-Banking: A Pioneering Service Approach in Commercial Banks in India

Transcription

1 Volume 8, Issue 4, October 2015 E-Banking: A Pioneering Service Approach in Commercial Banks in India Pooja Research Scholar (SRF) Faculty of Commerce, Banaras Hindu University Abstract Demand for financial services is changing rapidly and customer behaviour regarding these services is also adapting rapidly. Consequently, with the passing of the traditional banking to electronic banking, new strategies have become necessary in order to attract and retain existing as well new customers. E-banking is the most innovative trend among the customers. The transfer from the traditional banking to e-banking has been a rising amendment in banking dealings. Enlarged competition, the advancement of information & communication technology, and changing business environment etc. are the important concerns that have forced banking services to change. This particular paper tries to explore the role and relevance of e-banking in regard to customer services and as a cost reduction tool for banks in India and the initiative taken by RBI along with progress made by Scheduled Commercial Banks in this regard. Keywords: ECS Credit, ECS Debit, National Electronic Funds Transfer (NEFT) System, Cheque Truncation Payment Introduction Banks have usually been in the front position of exploiting technology to improve their products/services and working competence. Over a long period of time banks have been using electronic and telecommunication modes for delivering a wide range of value-added product/services. The transaction channels include private networks; public networks etc. and the devices include phone, computers, Automated Teller Machines (ATMs), etc. The wide use of computers, laptops, tablet, mobile phones etc. make easy access to internet and World Wide Web. This form of banking is generally referred to as Electronic Banking, although the range of products and services offered by different banks vary widely both in their content and sophistication. From the perspective of banking products and services being offered through internet, debit and credit cards, ATMs, mobiles, e-banking is nothing more than traditional banking services delivered through an electronic communication backbone. Objectives The main objectives of the paper are to identify the role and relevance 58

2 e-banking in regard to customer services and as a cost reduction tool to banks in India; and to analyse the growth and progress made by scheduled commercial banks in regards to e-banking services. Research Methodology Particularly, this study is descriptive in nature. Secondary data collected from various available resources like reports Reserve Bank of India, documents of Planning Commission of India, books, articles and web resources. Simple tabular analysis and relevant graphs are used for analysis purpose wherever found relevant for particular study. Electronic Banking: A Conceptual Framework Business houses rely on efficient and quick access to banking information for cash flow checks, inspecting and day to day transaction processing. E-banking offers ease of access, secured transactions and 24-hour banking services. In information-driven business environment, companies who do not use e-banking are out of the race of achievement of competitive advantages. E- Banking is the latest invention in the series of technological surprises in the recent past. ATMs, tele-banking, internet banking, credit cards and debit cards have appeared as successful delivery channels for common banking products/services. provision of retail and small value banking products and services through electronic channels, such products and services can include deposit taking, lending, account management, the provision of financial advice, electronic bill payment products and services such as electronic money. Banking institutions have become an essential component of most economies whether they are described as engines for economic growth or as acting as conduits towards promoting economic growth stated by the Basel Committee. It eliminates the conventional physical barriers as it could arrive at customers of different countries. This has increased the enquiry of the influence of the supervisory system, to which such dealings should be subjected. It has added a new height to different kinds of risks usually associated with banking, heightening some of them and flings new risk control challenges. It is convenient, it is not bound by functioning timings, there are no geographical barriers and the services can be offered at a miniscule cost. Through e-banking, customers can check transactions at any time of the day and as many times as they want to. They get quarterly statements from the bank absolutely free. E-banking is a Valuable Hi-tech means for increasing Functioning and Incomes of the Banks Through e-banking, bank customers can request the Now a day's banks have speedily affected through the information and carry out most retail banking services such potentials of the internet technologies and adopted the as balance reporting, inter-account money transfers, bill online banking. The majority of banks now offer a multitude payment, etc., via telecommunication network without of banking services and products to a continually increasing leaving their home or offices. It provides universal base of banking customers. It is worth to say that internet connections from any location worldwide and are has changed the magnitude of competition in the banking universally accessible from any internet linked computer or industry. Next to the opening of computerised banking, other related devices. The information technology ATMs, credit and debit cards, electronic cheques, SMS developments in the banking sector have speed up banking etc. which are the preliminary foundation of e- communication and transactions for the present as well finance, the bigger acceptance and saturation of internet has potential clients. It is very important to enlarge this banking created a new delivery channel in retail banking i.e. e- trait to clients for maximising the advantages for both clients banking. Through a circular of Reserve Bank of India, the and service providers as well. benefit of e-banking can be understood as, internet is emerging as a powerful channel for banks to receive E- Banking is a Convenient Banking Service to instructions and deliver products and services to their Customers for Banking Transactions customers. This form of banking is known as internet This fast emerging economy which may be called the digital banking (Reserve Bank of India, 2001). economy is bringing with it rapidly shifting technologies, Banks can accumulate a large amount of working capital rising knowledge strength in the areas of business and from not having to open slab and field branches in new creating effective supply chains and new forms of locations and far distant areas. These savings can be gained businesses and service delivery channels such as e-banking. in the form of reduced or cost-free charge for inter-bank and E-banking has been used in many different ways, partly intra-bank money transfers, no fees are required for online because electronic banking refers to several types of payment of utilities' bills, and cash-back on frequent use of services through which banks' customers can request applied bank credit cards. information and carry out most banking services by means of the internet, television or mobiles. A more comprehensive definition for e-banking comes from the Basel Committee Report on banking supervision that is E-banking is the 59

3 Volume 8, Issue 4, October 2015 Growth of E-banking Services by Scheduled obtained from the bank's application system either in batch Commercial Banks in India mode or off-line. The application systems cannot directly Initiatives taken by Reserve Bank of India access through the internet. Ø Fully Electronic Transactional System: This The Reserve Bank of India constituted a working group on system allows bi-directional potentials. Transactions can be Internet Banking. The group divided the internet banking accepted by the customer for online update. This method products in India into 3 types based on the levels of access requires a high degree of security and control mechanism. In granted. They are: this situation, web server and application systems are linked Ø Information through Electronic System: Broad over the secure infrastructure. purpose information like interest rates, branch location, Some statistics on the progress made in different e- bank products, loan and deposit calculations are provided in banking services: the banks website. The communication is usually done through . There is no contact between the customer Automated Teller Machines (ATMs): - ATM is a modern and bank's application system. No identification of the machine initiated by the banks to facilitate the customers to customer is made. In this system, there is no possibility of have access to money regularly without visiting the bank any unofficial person getting into production systems of the personally. ATM has turned into the most popular and bank through internet. suitable delivery means throughout the country. Table 1 specifies the growth made by ATMs of Scheduled Ø Electronic Information Transfer System: This Commercial Banks in India for the period from to - system provides customer-specific information in the form of account balances, monetary transaction details, statement of accounts etc. Identification and authentication of the customer are done through a password. The information is 60

4 The table one indicates that the penetration of ATMs across Debit Cards: Debit cards permit anyplace and any time the country rose during the year with the total accesses to the customers with their savings account or number of ATMs amounting 1, 14,014, compared to 43,651 current account. Customers having a debit card need not to ATMs during It can be seen from graph 1 also. carry cash all the time with them. Table 2 and graph 2 Taking bank wise growth of ATMs it has observed that illustrates bank group-wise outstanding number of debit public sector banks issued more ATMs compared to private cards issued by scheduled commercial banks in India at end and foreign banks. March every year from to In the year , public sector banks have issued highest number of debit cards million as compared to million debit cards issued by private sector banks and 3.30 million debit cards issued by foreign banks operating in India. Taking into consideration, the total debit cards issued by scheduled commercial banks, it has found that million cards issued during compared to cards issued by scheduled commercial banks in the Indian economy during Credit Cards: Credit cards also serve as a handy medium of exchange of money. It allows a customer to purchase products or services within a prescribed limit from certain authorised retail shop and service establishments without making immediate any cash payments. It is also called plastic money. Table 3 and graph 3 illustrates bank group-wise outstanding number of credit cards issued by scheduled commercial banks in India at end March every year from to

5 Volume 8, Issue 4, October 2015 From the analysis of table 3 it has found that, during the year Transfer (NEFT) have improved the speed of monetary , private sector banks have issued highest number of transactions across the country. Electronic Clearing Service credit cards 11.1 million as compared to 3.5 million credit (ECS) is one of the new electronic banking services. ECS is cards issued by public sector banks and 5.0 million debit a non-paper-based movement of funds which is initiated by cards issued by foreign banks operating in India. But taking the Reserve Bank of India on a wide scale. ECS consists of into consideration, the total credit cards issued by scheduled Electronic Credit Clearing Service (ECS Credit) and commercial banks, it has found that 19.5 million cards Electronic Debit Clearing Service (ECS Debit). National issued during compared to cards issued by Electronic Fund Transaction (NEFT) is a deferred net scheduled commercial banks in the Indian economy during settlement system and is a development over other forms in terms of safety and processing competence. Table 4 shows Transactions through Retail Electronic Payment Systems: the volume of electronic transactions of Scheduled Commercial Banks. The electronic payment systems such as Electronic Clearing Service (ECS) credit and debit and National Electronic Fund 62

6 From the analysis of table 4 and graph 4, it can be said that remarkably at million during the year the volume of ECS Debit (177.0) is greater than ECS Credit against million at the end of March 31, (122.20) during The volume of NEFT (394.0) has Table 5 shows the value of electronic transactions of also greater than ECS Debit and ECS Credit during scheduled commercial banks. 13.Comparing the transactions through retail electronic payment systems, it has seen that the total volume increased 63

7 Volume 8, Issue 4, October 2015 From the analysis of table 4 and graph 5, it can be said that February the value of ECS Debit (Rs billion) is greater Chavan Jayshree (2013): Internet Banking- Benefits and than ECS Credit (Rs billion) during Challenges in an Emerging Economy; International The value of NEFT (Rs billion) is quite greater Journal of Research in Business Management; Vol. than ECS Debit and ECS Credit during the financial year 1, Issue 1, June 2013, pp Comparing the transactions through retail electronic payment systems, it has seen that the total Komal and Rani Vandna (2012): Progress of Banking in value increased remarkably at Rs billion India-Customers Perspective; Business during the year against Rs billion at the Intelligence Journal, January 2012, retrieved from end of March 31, Conclusion GuptaKamal K and Bansal Ipshita (2012): Development of an Instrument to measure Internet Banking E-banking has added a new height to different kinds of risks Service Quality in India; Journal of Arts, Science associated with banking. It facilitates security of banking & Commerce, Vol. III, Issue 2(2), April 2012, dealings, the validity of an electronic contract, customers' retrieved from privacy etc. and poses a strategic risk of loss of business to those banks who do not respond in time, to this new Gupta V, (2002). Overview of E-banking, E-banking: A technology, being the efficient and cost effective delivery Global Perspective Bankers Growth and Extent of system. For commercial banks, e-banking is the use of Electronic Banking Services in India; retrieved electronic way to transfer funds directly from one account to from another account, rather than through cheques or cash money. Lal Roshan and Saluja Rajani (2012): E- Banking- The E- Banking services can increase bank income and profits by Indian Scenario; Asia Pacific Journal of Marketing reducing bank costs. No doubt commercial banks operating & Management Review, Vol.1 (4), December in India are making genuine efforts for the implementation (2012), retrieved from of superior technology and putting of e-delivery channels, but individuals are still unwilling to accept the system because of the risk linked with it. Customers are not ready to Majid Karimzadeh: Electronic Banking Challenges in India: take any risk on using the new methods. That is why it is An Empirical Investigation; retrieved from important to spread the information about e-banking and its benefits and uses in context to security and privacy of customers' personal bank data. Malhotra Pooja and Singh Balwinder: The Impact of References Internet Banking on Bank Performance and Risk: The Indian Experience; Eurasian Journal of Alex Adddae-Korankye (2014): The Impact of E-banking n Business and Economics, Vol. 2 (4), 2009, retrieved Customer Service and Profitability of Banks in from Ghana; Global Journal of Commerce and Meihami Bahram, Varmaghan Zeinab and Meihami Management Perspective, Vol.3(1), January- Hussein: The Effect of Using Electronic Banking 64

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